Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________________
FORM 10-Q
x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2018
OR
o    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                to                
Commission File Number: 1-13199 (SL Green Realty Corp.)
Commission File Number: 33-167793-02 (SL Green Operating Partnership, L.P.)
______________________________________________________________________
SL GREEN REALTY CORP.
SL GREEN OPERATING PARTNERSHIP, L.P.
(Exact name of registrant as specified in its charter)
______________________________________________________________________
SL Green Realty Corp.
Maryland
13-3956755
SL Green Operating Partnership, L.P.
Delaware
13-3960938
 
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
420 Lexington Avenue, New York, NY 10170
(Address of principal executive offices—Zip Code)

(212) 594-2700
(Registrant's telephone number, including area code)
______________________________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 
SL Green Realty Corp.    Yes x    No o            SL Green Operating Partnership, L.P.    Yes x    No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 
SL Green Realty Corp.     Yes x    No o            SL Green Operating Partnership, L.P.    Yes x    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
SL Green Realty Corp.
Large accelerated filer
x
 
Accelerated filer
o
Non-accelerated filer
o
 (Do not check if a smaller reporting company)
 
Smaller Reporting Company
o
 
Emerging Growth Company
o
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
o
SL Green Operating Partnership, L.P.
Large accelerated filer
o
 
Accelerated filer
o
Non-accelerated filer
x
 (Do not check if a smaller reporting company)
 
Smaller Reporting Company
o
 
Emerging Growth Company
o
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). 
SL Green Realty Corp.    Yes o    No x            SL Green Operating Partnership, L.P.    Yes o    No x
As of August 7, 2018, 86,566,698 shares of SL Green Realty Corp.'s common stock, par value $0.01 per share, were outstanding. As of August 7, 2018, 1,468,438 common units of limited partnership interest of SL Green Operating Partnership, L.P. were held by non-affiliates. There is no established trading market for such units.
 




EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended June 30, 2018 of SL Green Realty Corp. and SL Green Operating Partnership, L.P. Unless stated otherwise or the context otherwise requires, references to "SL Green Realty Corp.," the "Company" or "SL Green" mean SL Green Realty Corp. and its consolidated subsidiaries; and references to "SL Green Operating Partnership, L.P.," the "Operating Partnership" or "SLGOP" mean SL Green Operating Partnership, L.P. and its consolidated subsidiaries. The terms "we," "our" and "us" mean the Company and all the entities owned or controlled by the Company, including the Operating Partnership.
The Company is a Maryland corporation which operates as a self-administered and self-managed real estate investment trust, or REIT, and is the sole managing general partner of the Operating Partnership. As a general partner of the Operating Partnership, the Company has full, exclusive and complete responsibility and discretion in the day-to-day management and control of the Operating Partnership.
As of June 30, 2018 the Company owns 94.80% of the outstanding general and limited partnership interest in the Operating Partnership. The Company also owns 9,200,000 Series I Preferred Units of the Operating Partnership. As of June 30, 2018, noncontrolling investors held, in aggregate, a 5.20% limited partnership interest in the Operating Partnership. We refer to these interests as the noncontrolling interests in the Operating Partnership.
The Company and the Operating Partnership are managed and operated as one entity. The financial results of the Operating Partnership are consolidated into the financial statements of the Company. The Company has no significant assets other than its investment in the Operating Partnership. Substantially all of our assets are held by, and our operations are conducted through, the Operating Partnership. Therefore, the assets and liabilities of the Company and the Operating Partnership are substantially the same.
Noncontrolling interests in the Operating Partnership, stockholders' equity of the Company and partners' capital of the Operating Partnership are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership. The common limited partnership interests in the Operating Partnership not owned by the Company are accounted as noncontrolling interests, within mezzanine equity, in the Company's and the Operating Partnership's consolidated financial statements.
We believe combining the quarterly reports on Form 10-Q of the Company and the Operating Partnership into this single report results in the following benefits:
Combined reports enhance investors' understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;
Combined reports eliminate duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the Company's disclosure applies to both the Company and the Operating Partnership; and
Combined reports create time and cost efficiencies through the preparation of one combined report instead of two separate reports.
To help investors understand the significant differences between the Company and the Operating Partnership, this report presents the following separate sections for each of the Company and the Operating Partnership:
consolidated financial statements;
the following notes to the consolidated financial statements:
Note 11, Noncontrolling Interests on the Company’s Consolidated Financial Statements;
Note 12, Stockholders' Equity of the Company;
Note 13, Partners' Capital of the Operating Partnership.
This report also includes separate Part I, Item 4. Controls and Procedures sections and separate Exhibit 31 and 32 certifications for each of the Company and the Operating Partnership, respectively, in order to establish that the Chief Executive Officer and the Chief Financial Officer of the Company, in both their capacity as the principal executive officer and principal financial officer of the Company and the principal executive officer and principal financial officer of the general partner of the Operating Partnership, have made the requisite certifications and that the Company and the Operating Partnership are compliant with Rule 13a-15 and Rule 15d-15 of the Securities Exchange Act of 1934, as amended.



SL GREEN REALTY CORP. AND SL GREEN OPERATING PARTNERSHIP, L.P.
TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
 
Item 1.
FINANCIAL STATEMENTS
 
 
 
 
FINANCIAL STATEMENTS OF SL GREEN REALTY CORP.
 
 
Consolidated Balance Sheets as of June 30, 2018 (unaudited) and December 31, 2017
 
Consolidated Statements of Operations for the three and six months ended June 30, 2018 and 2017 (unaudited)
 
Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2018 and 2017 (unaudited)
 
Consolidated Statement of Equity for the six months ended June 30, 2018 (unaudited)
 
Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017 (unaudited)
 
 
 
 
FINANCIAL STATEMENTS OF SL GREEN OPERATING PARTNERSHIP, L.P.
 
 
Consolidated Balance Sheets as of June 30, 2018 (unaudited) and December 31, 2017
 
Consolidated Statements of Operations for the three and six months ended June 30, 2018 and 2017 (unaudited)
 
Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2018 and 2017 (unaudited)
 
Consolidated Statement of Capital for the six months ended June 30, 2018 (unaudited)
 
Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017 (unaudited)
 
Notes to Consolidated Financial Statements (unaudited)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Controls and Procedures (SL Green Realty Corp. and SL Green Operating Partnership, L.P.)
PART II.
OTHER INFORMATION
 
Legal Proceedings
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
Other Information
Exhibits
 
Signatures


Table of Contents


PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SL Green Realty Corp.
Consolidated Balance Sheets
(in thousands)
 
June 30, 2018
 
December 31, 2017
 
(unaudited)
 
 
Assets
 
 
 
Commercial real estate properties, at cost:
 
 
 
Land and land interests 
$
1,893,047

 
$
2,357,051

Building and improvements 
5,225,431

 
6,351,012

Building leasehold and improvements 
1,423,994

 
1,450,614

Properties under capital lease 
47,445

 
47,445

 
8,589,917

 
10,206,122

Less: accumulated depreciation 
(1,994,696
)
 
(2,300,116
)
 
6,595,221

 
7,906,006

Assets held for sale
593,995

 
338,354

Cash and cash equivalents
287,240

 
127,888

Restricted cash
92,740

 
122,138

Investments in marketable securities
28,570

 
28,579

Tenant and other receivables, net of allowance of $16,558 and $18,637 in 2018 and 2017, respectively
47,482

 
57,644

Related party receivables
27,854

 
23,039

Deferred rents receivable, net of allowance of $15,776 and $17,207 in 2018 and 2017, respectively
322,656

 
365,337

Debt and preferred equity investments, net of discounts and deferred origination fees of $23,216 and $25,507 in 2018 and 2017, respectively
2,168,515

 
2,114,041

Investments in unconsolidated joint ventures
3,059,985

 
2,362,989

Deferred costs, net
198,941

 
226,201

Other assets
290,729

 
310,688

Total assets (1)
$
13,713,928

 
$
13,982,904

Liabilities
 
 
 
Mortgages and other loans payable, net
$
2,517,097

 
$
2,837,282

Revolving credit facility, net
351,272

 
30,336

Unsecured term loan, net
1,492,320

 
1,491,575

Unsecured notes, net
1,396,722

 
1,395,939

Accrued interest payable
26,104

 
38,142

Other liabilities
108,151

 
188,005

Accounts payable and accrued expenses
140,739

 
137,142

Deferred revenue
95,756

 
208,119

Capital lease obligations 
43,221

 
42,843

Deferred land leases payable
3,567

 
3,239

Dividend and distributions payable
79,518

 
85,138

Security deposits
63,872

 
67,927

Liabilities related to assets held for sale
265,538

 
4,074

Junior subordinated deferrable interest debentures held by trusts that issued trust preferred securities
100,000

 
100,000

Total liabilities (1)
6,683,877

 
6,629,761


4

Table of Contents

SL Green Realty Corp.
Consolidated Balance Sheets
(in thousands, except per share data)

 
June 30, 2018
 
December 31, 2017
 
(unaudited)
 
 
Commitments and contingencies

 

Noncontrolling interests in Operating Partnership
486,610

 
461,954

Preferred units
301,385

 
301,735

 
 
 
 
Equity
 
 
 
SL Green stockholders' equity:
 
 
 
Series I Preferred Stock, $0.01 par value, $25.00 liquidation preference, 9,200 issued and outstanding at both June 30, 2018 and December 31, 2017
221,932

 
221,932

Common stock, $0.01 par value, 160,000 shares authorized and 86,780 and 93,858 issued and outstanding at June 30, 2018 and December 31, 2017, respectively (including 1,055 shares held in treasury at June 30, 2018 and December 31, 2017)
868

 
939

Additional paid-in-capital
4,601,608

 
4,968,338

Treasury stock at cost
(124,049
)
 
(124,049
)
Accumulated other comprehensive income
32,622

 
18,604

Retained earnings
1,457,835

 
1,139,329

Total SL Green stockholders' equity
6,190,816

 
6,225,093

Noncontrolling interests in other partnerships
51,240

 
364,361

Total equity
6,242,056

 
6,589,454

Total liabilities and equity
$
13,713,928

 
$
13,982,904

 
 
 
 
(1) The Company's consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs"). See Note 2. The consolidated balance sheets include the following amounts related to our consolidated VIEs, excluding the Operating Partnership: $175.0 million and $398.0 million of land, $0.3 billion and $1.4 billion of building and improvements, $2.0 million and $2.0 million of building and leasehold improvements, $47.4 million and $47.4 million of properties under capital lease, $32.2 million and $330.9 million of accumulated depreciation, $860.2 million and $221.0 million of other assets included in other line items, $136.2 million and $628.9 million of real estate debt, net, $0.4 million and $2.5 million of accrued interest payable, $43.2 million and $42.8 million of capital lease obligations, and $155.6 million and $56.8 million of other liabilities included in other line items as of June 30, 2018 and December 31, 2017, respectively.


The accompanying notes are an integral part of these consolidated financial statements.

5

Table of Contents

SL Green Realty Corp.
Consolidated Statements of Operations
(unaudited, in thousands, except per share data)


 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
2017
 
2018
 
2017
Revenues
 
 
 
 
 
 
 
 
Rental revenue, net
 
$
211,369

 
$
279,407

 
$
426,738

 
$
560,736

Escalation and reimbursement
 
27,052

 
42,620

 
53,451

 
86,812

Investment income
 
49,273

 
60,622

 
94,563

 
100,921

Other income
 
13,422

 
15,501

 
28,059

 
27,062

Total revenues
 
301,116

 
398,150

 
602,811

 
775,531

Expenses
 

 
 
 

 
 
Operating expenses, including related party expenses of $4,665 and $8,499 in 2018 and $5,262 and $9,436 in 2017, respectively.
 
56,237

 
70,852

 
116,019

 
145,358

Real estate taxes
 
45,322

 
60,945

 
90,983

 
122,013

Ground rent
 
8,846

 
8,308

 
17,154

 
16,616

Interest expense, net of interest income
 
53,611

 
64,856

 
101,527

 
130,478

Amortization of deferred financing costs
 
3,546

 
3,432

 
7,083

 
8,193

Depreciation and amortization
 
67,914

 
133,054

 
137,302

 
227,188

Transaction related costs
 
348

 
46

 
510

 
179

Marketing, general and administrative
 
22,479

 
24,256

 
46,007

 
48,399

Total expenses
 
258,303

 
365,749

 
516,585

 
698,424

Net income before equity in net income from unconsolidated joint ventures, equity in net gain on sale of interest in unconsolidated joint venture/real estate, purchase price and other fair value adjustments, (loss) gain on sale of real estate net, depreciable real estate reserves, and gain on sale of marketable securities
 
42,813

 
32,401

 
86,226

 
77,107

Equity in net income from unconsolidated joint ventures
 
4,702

 
3,412

 
8,738

 
10,026

Equity in net gain on sale of interest in unconsolidated joint venture/real estate
 
72,025

 
13,089

 
65,585

 
15,136

Purchase price and other fair value adjustments
 
11,149

 

 
60,442

 

(Loss) gain on sale of real estate, net
 
(14,790
)
 
(3,823
)
 
8,731

 
(3,256
)
Depreciable real estate reserves
 

 
(29,064
)
 

 
(85,336
)
Gain on sale of investment in marketable securities
 

 

 

 
3,262

Net income
 
115,899

 
16,015

 
229,722

 
16,939

Net (income) loss attributable to noncontrolling interests:
 
 
 
 
 
 
 
 
Noncontrolling interests in the Operating Partnership

(5,586
)
 
(419
)
 
(10,858
)
 
(895
)
Noncontrolling interests in other partnerships

(173
)
 
(786
)
 
(371
)
 
16,705

Preferred units distributions

(2,847
)
 
(2,851
)
 
(5,696
)
 
(5,701
)
Net income attributable to SL Green
 
107,293

 
11,959

 
212,797

 
27,048

Perpetual preferred stock dividends
 
(3,737
)
 
(3,737
)
 
(7,475
)
 
(7,475
)
Net income attributable to SL Green common stockholders
 
$
103,556

 
$
8,222

 
$
205,322

 
$
19,573

 
 
 
 
 
 
 
 
 

6

Table of Contents

SL Green Realty Corp.
Consolidated Statements of Operations
(unaudited, in thousands, except per share data)


 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
2017
 
2018
 
2017
Amounts attributable to SL Green common stockholders:
 
 
 
 
 
 
 
 
Income before depreciable real estate reserves and gains on sale and fair value adjustments
 
$
38,674

 
$
27,156

 
$
77,333

 
$
89,818

Purchase price and other fair value adjustments
 
10,578

 

 
57,406

 

Equity in net gain on sale of interest in unconsolidated joint venture/real estate
 
68,336

 
12,517

 
62,291

 
14,474

(Loss) gain on sale of real estate, net
 
(14,032
)
 
(3,656
)
 
8,292

 
(3,114
)
Depreciable real estate reserves
 

 
(27,795
)
 

 
(81,605
)
Net income attributable to SL Green common stockholders
 
$
103,556

 
$
8,222

 
$
205,322

 
$
19,573

Basic earnings per share:
 
 
 
 
 
 
 
 
Income before depreciable real estate reserves and gains on sale and fair value adjustments
 
$
0.44

 
$
0.27

 
$
0.87

 
$
0.90

Purchase price and other fair value adjustments
 
0.12

 

 
0.65

 

Equity in net gain on sale of interest in unconsolidated joint venture/real estate
 
0.79

 
0.13

 
0.70

 
0.14

(Loss) gain on sale of real estate, net
 
(0.16
)
 
(0.04
)
 
0.09

 
(0.03
)
Depreciable real estate reserves
 

 
(0.28
)
 

 
(0.81
)
Net income attributable to SL Green common stockholders
 
$
1.19

 
$
0.08

 
$
2.31


$
0.20

Diluted earnings per share:
 
 
 
 
 
 
 
 
Income before depreciable real estate reserves and gains on sale and fair value adjustments
 
$
0.44

 
$
0.27

 
$
0.87

 
$
0.89

Purchase price and other fair value adjustments
 
0.12

 

 
0.65

 

Equity in net gain on sale of interest in unconsolidated joint venture/real estate
 
0.79

 
0.12

 
0.70

 
0.14

(Loss) gain on sale of real estate, net
 
(0.16
)
 
(0.04
)
 
0.09

 
(0.03
)
Depreciable real estate reserves
 

 
(0.27
)
 

 
(0.81
)
Net income attributable to SL Green common stockholders
 
$
1.19

 
$
0.08

 
$
2.31

 
$
0.19

 
 
 
 
 
 
 
 
 
Dividends per share
 
$
0.8125

 
$
0.775

 
$
1.625

 
$
1.55

Basic weighted average common shares outstanding
 
87,176

 
99,900

 
88,772

 
100,268

Diluted weighted average common shares and common share equivalents outstanding
 
92,083

 
104,732

 
93,667

 
105,140



The accompanying notes are an integral part of these consolidated financial statements.

7

Table of Contents


SL Green Realty Corp.
Consolidated Statements of Comprehensive Income
(unaudited, in thousands)

 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
2017
 
2018
 
2017
Net income

$
115,899

 
$
16,015

 
$
229,722

 
$
16,939

Other comprehensive income (loss):


 
 
 

 
 
Change in net unrealized gain (loss) on derivative instruments, including SL Green's share of joint venture net unrealized gain (loss) on derivative instruments

3,977

 
(2,520
)
 
14,890

 
(3,595
)
Change in unrealized gain (loss) on marketable securities

318

 
263

 
(8
)
 
(4,487
)
Other comprehensive income (loss)

4,295

 
(2,257
)
 
14,882

 
(8,082
)
Comprehensive income

120,194

 
13,758

 
244,604

 
8,857

Net (income) loss attributable to noncontrolling interests and preferred units distributions

(8,606
)
 
(4,056
)
 
(16,925
)
 
10,109

Other comprehensive (loss) income attributable to noncontrolling interests

(245
)
 
100

 
(864
)
 
299

Comprehensive income attributable to SL Green

$
111,343

 
$
9,802

 
$
226,815

 
$
19,265



The accompanying notes are an integral part of these consolidated financial statements.


8

Table of Contents

SL Green Realty Corp.
Consolidated Statement of Equity
(unaudited, in thousands, except per share data)


 
SL Green Realty Corp. Stockholders
 
 
 
 
 
 
Common Stock
 
 
 
 
 
 
 
 
 


 
 
Series I
Preferred
Stock
 
Shares
 
Par
Value
 
Additional
Paid-
In-Capital
 
Treasury
Stock
 
Accumulated
Other
Comprehensive Income
 
Retained
Earnings
 
Noncontrolling
Interests
 
Total
Balance at December 31, 2017
 
$
221,932

 
92,803

 
$
939

 
$
4,968,338

 
$
(124,049
)
 
$
18,604

 
$
1,139,329

 
$
364,361

 
$
6,589,454

Cumulative adjustment upon adoption of ASC 610-20
 
 
 
 
 
 
 
 
 
 
 
 
 
570,524

 
 
 
570,524

Balance at January 1, 2018
 
$
221,932

 
92,803

 
$
939

 
$
4,968,338

 
$
(124,049
)
 
$
18,604

 
$
1,709,853

 
$
364,361

 
$
7,159,978

Net income
 
 
 
 
 
 
 
 
 
 
 
 
 
212,797

 
371

 
213,168

Other comprehensive income
 
 
 
 
 
 
 
 
 
 
 
14,018

 
 
 
 
 
14,018

Preferred dividends
 
 
 
 
 
 
 
 
 
 
 
 
 
(7,475
)
 
 
 
(7,475
)
DRSPP proceeds
 
 
 
1

 
 
 
64

 
 
 
 
 
 
 
 
 
64

Conversion of units in the Operating Partnership for common stock
 
 
 
15

 
 
 
1,560

 
 
 
 
 
 
 
 
 
1,560

Reallocation of noncontrolling interest in the Operating Partnership
 
 
 
 
 
 
 
 
 
 
 
 
 
(4,493
)
 
 
 
(4,493
)
Deferred compensation plan and stock awards, net of forfeitures and tax withholdings
 
 
 
(20
)
 
 
 
8,090

 
 
 
 
 
 
 
 
 
8,090

Repurchases of common stock
 
 
 
(7,133
)
 
(72
)
 
(382,080
)
 
 
 
 
 
(310,939
)
 
 
 
(693,091
)
Proceeds from stock options exercised
 
 
 
59

 
1

 
5,636

 
 
 
 
 
 
 
 
 
5,637

Contributions to consolidated joint venture interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,828

 
1,828

Deconsolidation of partially owned entity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(314,596
)
 
(314,596
)
Cash distributions to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(724
)
 
(724
)
Cash distributions declared ($1.625 per common share, none of which represented a return of capital for federal income tax purposes)
 
 
 
 
 
 
 
 
 
 
 
 
 
(141,908
)
 
 
 
(141,908
)
Balance at June 30, 2018
 
$
221,932

 
85,725

 
$
868

 
$
4,601,608

 
$
(124,049
)
 
$
32,622

 
$
1,457,835

 
$
51,240

 
$
6,242,056



The accompanying notes are an integral part of these consolidated financial statements.

9

Table of Contents

SL Green Realty Corp.
Consolidated Statements of Cash Flows
(unaudited, in thousands, except per share data)


 
Six Months Ended June 30,
 
2018
 
2017
Operating Activities
 
 
 
Net income
$
229,722

 
$
16,939

Adjustments to reconcile net income to net cash provided by operating activities:

 

Depreciation and amortization
144,385

 
235,381

Equity in net income from unconsolidated joint ventures
(8,738
)
 
(10,026
)
Distributions of cumulative earnings from unconsolidated joint ventures
9,889

 
12,388

Equity in net gain on sale of interest in unconsolidated joint venture interest/real estate
(65,585
)
 
(15,136
)
Purchase price and other fair value adjustments
(60,442
)
 

Depreciable real estate reserves

 
85,336

(Gain) loss on sale of real estate, net
(8,731
)
 
3,256

Gain on sale of investments in marketable securities

 
(3,262
)
Deferred rents receivable
(4,369
)
 
(23,237
)
Other non-cash adjustments
9,404

 
20,352

Changes in operating assets and liabilities:

 
 
Tenant and other receivables
(397
)
 
1,447

Related party receivables
(1,116
)
 
(7,869
)
Deferred lease costs
(17,469
)
 
(23,560
)
Other assets
(4,329
)
 
680

Accounts payable, accrued expenses, other liabilities and security deposits
22,867

 
(11,310
)
Deferred revenue and land leases payable
1,121

 
29,471

Net cash provided by operating activities
246,212


310,850

Investing Activities
 
 
 
Acquisitions of real estate property
(9,733
)
 
(19
)
Additions to land, buildings and improvements
(96,577
)
 
(165,262
)
Acquisition deposits and deferred purchase price
(1,520
)
 

Investments in unconsolidated joint ventures
(254,305
)
 
(93,182
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
178,892

 
93,688

Net proceeds from disposition of real estate/joint venture interest
760,335

 
61,248

Proceeds from sale or redemption of marketable securities

 
54,363

Other investments
(22,790
)
 
3,014

Origination of debt and preferred equity investments
(603,575
)
 
(854,577
)
Repayments or redemption of debt and preferred equity investments
317,337

 
663,140

Net cash provided by (used in) investing activities
268,064

 
(237,587
)

10

Table of Contents

SL Green Realty Corp.
Consolidated Statements of Cash Flows
(unaudited, in thousands, except per share data)

 
Six Months Ended June 30,
 
2018
 
2017
Financing Activities
 
 
 
Proceeds from mortgages and other loans payable
$
210,575

 
$
779,642

Repayments of mortgages and other loans payable
(22,864
)
 
(693,243
)
Proceeds from revolving credit facility and senior unsecured notes
1,475,000

 
1,072,800

Repayments of revolving credit facility and senior unsecured notes
(1,155,000
)
 
(875,697
)
Proceeds from stock options exercised and DRIP issuance
5,701

 
11,706

Repurchase of common stock
(724,696
)
 
(211,599
)
Redemption of preferred stock
(350
)
 
(125
)
Distributions to noncontrolling interests in other partnerships
(724
)
 
(609
)
Contributions from noncontrolling interests in other partnerships
1,828

 
33,009

Distributions to noncontrolling interests in the Operating Partnership
(7,712
)
 
(7,112
)
Dividends paid on common and preferred stock
(160,699
)
 
(168,678
)
Other obligations related to loan participations
(3
)
 
10,000

Tax withholdings related to restricted share awards
(3,842
)
 
(3,879
)
Deferred loan costs and capitalized lease obligation
(1,536
)
 
(8,521
)
Net cash used in financing activities
(384,322
)
 
(62,306
)
Net increase in cash, cash equivalents, and restricted cash
129,954

 
10,957

Cash, cash equivalents, and restricted cash at beginning of year
250,026

 
369,967

Cash, cash equivalents, and restricted cash at end of period
$
379,980

 
$
380,924

 
 
 
 
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
 
 
 
Conversion of units in the Operating Partnership for common stock
1,560

 
13,242

Tenant improvements and capital expenditures payable
16,534

 
7,210

Fair value adjustment to noncontrolling interest in Operating Partnership
4,493

 
12,712

Deconsolidation of subsidiaries
298,403

 
328,644

Transfer of assets related to assets held for sale
593,995

 
173,918

Transfer of liabilities related to assets held for sale
265,538

 
149

Removal of fully depreciated commercial real estate properties
110,594

 
5,754

Share repurchase payable
31,605

 
41,598

Bond repurchase payable

 
65,416


The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows.
 
Six Months Ended June 30,
 
2018
 
2017
Cash and cash equivalents
$
287,240

 
$
270,965

Restricted cash
92,740

 
109,959

Total cash, cash equivalents, and restricted cash
$
379,980

 
$
380,924

The accompanying notes are an integral part of these consolidated financial statements.


11

Table of Contents
SL Green Operating Partnership, L.P.
Consolidated Balance Sheets
(in thousands)


 
 
June 30, 2018
 
December 31, 2017
 
 
(unaudited)
 
 
Assets
 
 
 
 
Commercial real estate properties, at cost:
 
 
 
 
Land and land interests 
 
$
1,893,047

 
$
2,357,051

Building and improvements 
 
5,225,431

 
6,351,012

Building leasehold and improvements 
 
1,423,994

 
1,450,614

Properties under capital lease 
 
47,445

 
47,445

 
 
8,589,917

 
10,206,122

Less: accumulated depreciation 
 
(1,994,696
)
 
(2,300,116
)
 
 
6,595,221

 
7,906,006

Assets held for sale
 
593,995

 
338,354

Cash and cash equivalents
 
287,240

 
127,888

Restricted cash
 
92,740

 
122,138

Investments in marketable securities
 
28,570

 
28,579

Tenant and other receivables, net of allowance of $16,558 and $18,637 in 2018 and 2017, respectively
 
47,482

 
57,644

Related party receivables
 
27,854

 
23,039

Deferred rents receivable, net of allowance of $15,776 and $17,207 in 2018 and 2017, respectively
 
322,656

 
365,337

Debt and preferred equity investments, net of discounts and deferred origination fees of $23,216 and $25,507 in 2018 and 2017, respectively
 
2,168,515

 
2,114,041

Investments in unconsolidated joint ventures
 
3,059,985

 
2,362,989

Deferred costs, net
 
198,941

 
226,201

Other assets
 
290,729

 
310,688

Total assets (1)
 
$
13,713,928

 
$
13,982,904

Liabilities
 
 
 
 
Mortgages and other loans payable, net
 
$
2,517,097

 
$
2,837,282

Revolving credit facility, net
 
351,272

 
30,336

Unsecured term loan, net
 
1,492,320

 
1,491,575

Unsecured notes, net
 
1,396,722

 
1,395,939

Accrued interest payable
 
26,104

 
38,142

Other liabilities
 
108,151

 
188,005

Accounts payable and accrued expenses
 
140,739

 
137,142

Deferred revenue
 
95,756

 
208,119

Capital lease obligations 
 
43,221

 
42,843

Deferred land leases payable
 
3,567

 
3,239

Dividend and distributions payable
 
79,518

 
85,138

Security deposits
 
63,872

 
67,927

Liabilities related to assets held for sale
 
265,538

 
4,074

Junior subordinated deferrable interest debentures held by trusts that issued trust preferred securities
 
100,000

 
100,000

Total liabilities (1)
 
6,683,877

 
6,629,761

Commitments and contingencies
 

 

Limited partner interests in SLGOP (4,700 and 4,453 limited partner common units outstanding at June 30, 2018 and December 31, 2017, respectively)
 
486,610

 
461,954

Preferred units
 
301,385

 
301,735


12

Table of Contents
SL Green Operating Partnership, L.P.
Consolidated Balance Sheets
(in thousands)


 
 
June 30, 2018
 
December 31, 2017
 
 
(unaudited)
 
 
Capital
 
 
 
 
SLGOP partners' capital:
 
 
 
 
Series I Preferred Units, $25.00 liquidation preference, 9,200 issued and outstanding at both June 30, 2018 and December 31, 2017
 
221,932

 
221,932

SL Green partners' capital (904 and 973 general partner common units and 84,821 and 91,831 limited partner common units outstanding at June 30, 2018 and December 31, 2017, respectively)
 
5,936,262

 
5,984,557

Accumulated other comprehensive income
 
32,622

 
18,604

Total SLGOP partners' capital
 
6,190,816

 
6,225,093

Noncontrolling interests in other partnerships
 
51,240

 
364,361

Total capital
 
6,242,056

 
6,589,454

Total liabilities and capital
 
$
13,713,928

 
$
13,982,904

 
 
 
 
 
(1) The Operating Partnership's consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs"). See Note 2. The consolidated balance sheets include the following amounts related to our consolidated VIEs, excluding the Operating Partnership: $175.0 million and $398.0 million of land, $0.3 billion and $1.4 billion of building and improvements, $2.0 million and $2.0 million of building and leasehold improvements, $47.4 million and $47.4 million of properties under capital lease, $32.2 million and $330.9 million of accumulated depreciation, $860.2 million and $221.0 million of other assets included in other line items, $136.2 million and $628.9 million of real estate debt, net, $0.4 million and $2.5 million of accrued interest payable, $43.2 million and $42.8 million of capital lease obligations, and $155.6 million and $56.8 million of other liabilities included in other line items as of June 30, 2018 and December 31, 2017, respectively.


The accompanying notes are an integral part of these consolidated financial statements.

13

Table of Contents

SL Green Operating Partnership, L.P.
Consolidated Statements of Operations
(unaudited, in thousands, except per unit data)



 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018

2017
 
2018
 
2017
Revenues
 
 
 
 
 
 
 
 
Rental revenue, net
 
$
211,369

 
$
279,407

 
$
426,738

 
$
560,736

Escalation and reimbursement
 
27,052

 
42,620

 
53,451

 
86,812

Investment income
 
49,273

 
60,622

 
94,563

 
100,921

Other income
 
13,422

 
15,501

 
28,059

 
27,062

Total revenues
 
301,116

 
398,150

 
602,811

 
775,531

Expenses
 

 
 
 

 
 
Operating expenses, including related party expenses of $4,665 and $8,499 in 2018 and $5,262 and $9,436 in 2017, respectively.
 
56,237

 
70,852

 
116,019

 
145,358

Real estate taxes
 
45,322

 
60,945

 
90,983

 
122,013

Ground rent
 
8,846

 
8,308

 
17,154

 
16,616

Interest expense, net of interest income
 
53,611

 
64,856

 
101,527

 
130,478

Amortization of deferred financing costs
 
3,546

 
3,432

 
7,083

 
8,193

Depreciation and amortization
 
67,914

 
133,054

 
137,302

 
227,188

Transaction related costs
 
348

 
46

 
510

 
179

Marketing, general and administrative
 
22,479

 
24,256

 
46,007

 
48,399

Total expenses
 
258,303

 
365,749

 
516,585

 
698,424

Net income before equity in net income from unconsolidated joint ventures, equity in net gain on sale of interest in unconsolidated joint venture/real estate, purchase price and other fair value adjustments, (loss) gain on sale of real estate net, depreciable real estate reserves, and gain on sale of marketable securities
 
42,813

 
32,401

 
86,226

 
77,107

Equity in net income from unconsolidated joint ventures
 
4,702

 
3,412

 
8,738

 
10,026

Equity in net gain on sale of interest in unconsolidated joint venture/real estate
 
72,025

 
13,089

 
65,585

 
15,136

Purchase price and other fair value adjustments
 
11,149

 

 
60,442

 

(Loss) gain on sale of real estate, net
 
(14,790
)
 
(3,823
)
 
8,731

 
(3,256
)
Depreciable real estate reserves
 

 
(29,064
)
 

 
(85,336
)
Gain on sale of investment in marketable securities
 

 

 

 
3,262

Net income
 
115,899

 
16,015

 
229,722

 
16,939

Net (income) loss attributable to noncontrolling interests:
 
 
 
 
 
 
 
 
Noncontrolling interests in other partnerships
 
(173
)
 
(786
)
 
(371
)
 
16,705

Preferred units distributions
 
(2,847
)
 
(2,851
)
 
(5,696
)
 
(5,701
)
Net income attributable to SLGOP
 
112,879

 
12,378

 
223,655

 
27,943

Perpetual preferred unit distributions
 
(3,737
)
 
(3,737
)
 
(7,475
)
 
(7,475
)
Net income attributable to SLGOP common unitholders
 
$
109,142

 
$
8,641

 
$
216,180

 
$
20,468


14

Table of Contents

SL Green Operating Partnership, L.P.
Consolidated Statements of Operations
(unaudited, in thousands, except per unit data)


 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018

2017
 
2018
 
2017
Amounts attributable to SLGOP common unitholders:
 
 
 
 
 
 
 
 
Income before depreciable real estate reserves and gains on sale and fair value adjustments
 
$
40,758

 
$
28,439


$
81,422


$
93,924

Purchase price and other fair value adjustments
 
11,149

 

 
60,442

 

Equity in net gain on sale of interest in unconsolidated joint venture/real estate
 
72,025

 
13,089

 
65,585

 
15,136

(Loss) gain on sale of real estate, net
 
(14,790
)
 
(3,823
)
 
8,731

 
(3,256
)
Depreciable real estate reserves
 

 
(29,064
)
 

 
(85,336
)
Net income attributable to SLGOP common unitholders
 
$
109,142

 
$
8,641

 
$
216,180

 
$
20,468

Basic earnings per unit:
 
 
 
 
 
 
 
 
Income before depreciable real estate reserves and gains on sale and fair value adjustments
 
$
0.44

 
$
0.27

 
$
0.87

 
$
0.90

Purchase price and other fair value adjustments
 
0.12

 

 
0.65

 

Equity in net (loss) gain on sale of interest in unconsolidated joint venture/real estate
 
0.79

 
0.13

 
0.70

 
0.14

(Loss) gain on sale of real estate, net
 
(0.16
)
 
(0.04
)
 
0.09

 
(0.03
)
Depreciable real estate reserves
 

 
(0.28
)
 

 
(0.81
)
Net income attributable to SLGOP common unitholders
 
$
1.19

 
$
0.08


$
2.31


$
0.20

Diluted earnings per unit:
 
 
 
 
 
 
 
 
Income before depreciable real estate reserves and gains on sale and fair value adjustments
 
$
0.44

 
$
0.27

 
$
0.87

 
$
0.89

Purchase price and other fair value adjustments
 
0.12

 

 
0.65

 

Equity in net (loss) gain on sale of interest in unconsolidated joint venture/real estate
 
0.79

 
0.12

 
0.70

 
0.14

(Loss) gain on sale of real estate, net
 
(0.16
)
 
(0.04
)
 
0.09

 
(0.03
)
Depreciable real estate reserves
 

 
(0.27
)
 

 
(0.81
)
Net income attributable to SLGOP common unitholders
 
$
1.19

 
$
0.08

 
$
2.31

 
$
0.19

 
 
 
 
 
 
 
 
 
Dividends per unit
 
$
0.8125

 
$
0.775

 
$
1.625

 
$
1.55

Basic weighted average common units outstanding
 
91,882

 
104,462

 
93,467

 
104,852

Diluted weighted average common units and common unit equivalents outstanding
 
92,083

 
104,732

 
93,667

 
105,140



The accompanying notes are an integral part of these consolidated financial statements.


15

Table of Contents


SL Green Operating Partnership, L.P.
Consolidated Statements of Comprehensive Income
(unaudited, in thousands)

 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018

2017
 
2018
 
2017
Net income
 
$
115,899

 
$
16,015

 
$
229,722

 
$
16,939

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Change in net unrealized gain on derivative instruments, including SLGOP's share of joint venture net unrealized gain on derivative instruments
 
3,977

 
(2,520
)
 
14,890

 
(3,595
)
Change in unrealized gain (loss) on marketable securities
 
318

 
263

 
(8
)
 
(4,487
)
Other comprehensive income (loss)
 
4,295

 
(2,257
)
 
14,882

 
(8,082
)
Comprehensive income
 
120,194

 
13,758

 
244,604

 
8,857

Net (loss) income attributable to noncontrolling interests
 
(173
)
 
(786
)
 
(371
)
 
16,705

Other comprehensive (loss) income attributable to noncontrolling interests
 
(245
)
 
100

 
(864
)
 
299

Comprehensive income attributable to SLGOP
 
$
119,776

 
$
13,072

 
$
243,369

 
$
25,861



The accompanying notes are an integral part of these consolidated financial statements.


16

Table of Contents

SL Green Operating Partnership, L.P.
Consolidated Statement of Capital
(unaudited, in thousands, except per unit data)



 
 
SL Green Operating Partnership Unitholders
 
 
 
 
 
 
 
 
Partners' Interest
 
 
 
 
 
 
 
 
Series I
Preferred
Units
 
Common
Units
 
Common
Unitholders
 
Accumulated
Other
Comprehensive Income
 
Noncontrolling
Interests
 
Total
Balance at December 31, 2017
 
$
221,932

 
92,803

 
$
5,984,557

 
$
18,604

 
$
364,361

 
$
6,589,454

Cumulative adjustment upon adoption of ASC 610-20
 
 
 
 
 
570,524

 
 
 
 
 
570,524

Balance at January 1, 2018
 
$
221,932

 
92,803

 
$
6,555,081

 
$
18,604

 
$
364,361

 
$
7,159,978

Net income
 
 
 
 
 
212,797

 
 
 
371

 
213,168

Other comprehensive income
 
 
 
 
 
 
 
14,018

 


 
14,018

Preferred distributions
 
 
 
 
 
(7,475
)
 
 
 
 
 
(7,475
)
DRSPP proceeds
 
 
 
1

 
64

 
 
 
 
 
64

Conversion of common units
 
 
 
15

 
1,560

 
 
 
 
 
1,560

Reallocation of noncontrolling interests in the operating partnership
 
 
 
 
 
(4,493
)
 
 
 
 
 
(4,493
)
Deferred compensation plan and stock awards, net of forfeitures and tax withholdings
 
 
 
(20
)
 
8,090

 
 
 
 
 
8,090

Repurchases of common stock
 
 
 
(7,133
)
 
(693,091
)
 
 
 
 
 
(693,091
)
Contribution to consolidated joint venture interests
 
 
 
 
 
 
 
 
 
1,828

 
1,828

Deconsolidation of partially owned entity
 
 
 
 
 
 
 
 
 
(314,596
)
 
(314,596
)
Contributions - proceeds from stock options exercised
 
 
 
59

 
5,637

 
 
 
 
 
5,637

Cash distributions to noncontrolling interests
 
 
 
 
 
 
 
 
 
(724
)
 
(724
)
Cash distributions declared ($1.625 per common unit, none of which represented a return of capital for federal income tax purposes)
 
 
 
 
 
(141,908
)
 
 
 
 
 
(141,908
)
Balance at June 30, 2018
 
$
221,932

 
85,725

 
$
5,936,262

 
$
32,622

 
$
51,240

 
$
6,242,056

   

The accompanying notes are an integral part of these consolidated financial statements.


17

Table of Contents

SL Green Operating Partnership, L.P.
Consolidated Statements of Cash Flows
(unaudited, in thousands)



 
Six Months Ended June 30,
 
2018

2017
Operating Activities
 
 
 
Net income
$
229,722

 
$
16,939

Adjustments to reconcile net income to net cash provided by operating activities:

 
 
Depreciation and amortization
144,385

 
235,381

Equity in net income from unconsolidated joint ventures
(8,738
)
 
(10,026
)
Distributions of cumulative earnings from unconsolidated joint ventures
9,889

 
12,388

Equity in net gain on sale of interest in unconsolidated joint venture interest/real estate
(65,585
)
 
(15,136
)
Purchase price and other fair value adjustments
(60,442
)
 

Depreciable real estate reserves

 
85,336

(Gain) loss on sale of real estate, net
(8,731
)
 
3,256

Gain on sale of investments in marketable securities

 
(3,262
)
Deferred rents receivable
(4,369
)
 
(23,237
)
Other non-cash adjustments
9,404

 
20,352

Changes in operating assets and liabilities:

 
 
Tenant and other receivables
(397
)
 
1,447

Related party receivables
(1,116
)
 
(7,869
)
Deferred lease costs
(17,469
)
 
(23,560
)
Other assets
(4,329
)
 
680

Accounts payable, accrued expenses, other liabilities and security deposits
22,867

 
(11,310
)
Deferred revenue and land leases payable
1,121

 
29,471

Net cash provided by operating activities
246,212

 
310,850

Investing Activities

 
 
Acquisitions of real estate property
(9,733
)
 
(19
)
Additions to land, buildings and improvements
(96,577
)
 
(165,262
)
Acquisition deposits and deferred purchase price
(1,520
)
 

Investments in unconsolidated joint ventures
(254,305
)
 
(93,182
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
178,892

 
93,688

Net proceeds from disposition of real estate/joint venture interest
760,335

 
61,248

Proceeds from sale or redemption of marketable securities

 
54,363

Other investments
(22,790
)
 
3,014

Origination of debt and preferred equity investments
(603,575
)
 
(854,577
)
Repayments or redemption of debt and preferred equity investments
317,337

 
663,140

Net cash provided by (used in) investing activities
268,064

 
(237,587
)
 
 
 
 

18

Table of Contents

SL Green Operating Partnership, L.P.
Consolidated Statements of Cash Flows
(unaudited, in thousands)


 
Six Months Ended June 30,
 
2018

2017
Financing Activities
 
 
 
Proceeds from mortgages and other loans payable
$
210,575

 
$
779,642

Repayments of mortgages and other loans payable
(22,864
)
 
(693,243
)
Proceeds from revolving credit facility and senior unsecured notes
1,475,000

 
1,072,800

Repayments of revolving credit facility and senior unsecured notes
(1,155,000
)
 
(875,697
)
Proceeds from stock options exercised and DRIP issuance
5,701

 
11,706

Repurchase of common stock
(724,696
)
 
(211,599
)
Redemption of preferred stock
(350
)
 
(125
)
Distributions to noncontrolling interests in other partnerships
(724
)
 
(609
)
Contributions from noncontrolling interests in other partnerships
1,828

 
33,009

Distributions paid on common and preferred units
(168,411
)
 
(175,790
)
Other obligations related to loan participations
(3
)
 
10,000

Tax withholdings related to restricted share awards
(3,842
)

(3,879
)
Deferred loan costs and capitalized lease obligation
(1,536
)
 
(8,521
)
Net cash used in financing activities
(384,322
)
 
(62,306
)
Net increase in cash, cash equivalents, and restricted cash
129,954

 
10,957

Cash, cash equivalents, and restricted cash at beginning of year
250,026

 
369,967

Cash, cash equivalents, and restricted cash at end of period
$
379,980

 
$
380,924

 
 
 
 
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
 
 
 
Conversion of units in the Operating Partnership for common stock
1,560

 
13,242

Tenant improvements and capital expenditures payable
16,534

 
7,210

Fair value adjustment to noncontrolling interest in Operating Partnership
4,493

 
12,712

Deconsolidation of subsidiaries
298,403

 
328,644

Transfer of assets related to assets held for sale
593,995

 
173,918

Transfer of liabilities related to assets held for sale
265,538

 
149

Removal of fully depreciated commercial real estate properties
110,594

 
5,754